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Great Outdoze Company manufactures sleeping bags, which sell for $66.10 each. The variable costs of...

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Accounting

Great Outdoze Company manufactures sleeping bags, which sell for $66.10 each. The variable costs of production are as follows:

Direct material $ 18.20
Direct labor 11.00
Variable manufacturing overhead 7.10

Budgeted fixed overhead in 20x1 was $165,600 and budgeted production was 23,000 sleeping bags. The years actual production was 23,000 units, of which 20,700 were sold. Variable selling and administrative costs were $2.00 per unit sold; fixed selling and administrative costs were $21,000.

Required:

1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing.

2-a. Prepare an operating income statement for the year using absorption costing.

2-b. Prepare an operating income statement for the year using variable costing.

3. Reconcile reported operating income under the two methods using the shortcut method.

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